Martina Neary, UK Insurance Leader at EY, comments: “While cost of living pressures for consumers are beginning to ease, inflation remains high and premiums are rising, driving a real concern that some consumers may stop making policy payments or go without sufficient cover. In 2024, the industry will continue to prioritise customer support throughout this challenging period while managing their own costs carefully.
“UK insurers will need to navigate this challenging macroeconomic environment while maintaining focus on critical growth areas including ESG and digital transformation. Gen AI is now high on the agenda and will be a strong focus next year, so firms will be upskilling staff, hiring and developing the requisite talent, and managing the associated risks and ethical considerations that come with this technology.
“Keeping pace with regulatory change will be a continued focus for the industry in 2024. Firms have navigated the introduction of the General Insurance Pricing Practices regime and the Consumer Duty in recent years – both substantial pieces of regulation which have radically impacted strategies and pricing approaches. Compliance with these new rules was the first step for firms, and now focus should turn to ensuring these principles are truly embedded throughout their operations and culture. Insurers will also be mindful of the March 2025 deadline for Operational Resilience, and with the PRA expected to monitor progress over the next year, firms will need to be preparing practices and capabilities now.
“Overall, to ensure all regulatory requirements are appropriately met, insurers will need to continue to enhance their systems and processes to enable more mature management information (MI) and get a true understanding of the customer experience and the outcomes being delivered.”
Specialty insurers performed well in 2023 but challenges expected in 2024
Martina Neary continues: “UK specialty insurance and reinsurance firms have performed well throughout 2023, with strong H1 results underpinned by robust underwriting and investment returns being boosted by interest rate increases. The second half of 2023 has benefitted from relatively benign weather events, however, following a period of steady premium rate increases and market hardening, some lines – in particular, management liability and cyber insurance – are showing signs of softening.
“Looking to next year, in addition to contending with this mixed pricing environment, the UK’s specialty market will continue to face challenges including increasing weather events, sustained inflation and cost pressures, and increasing geopolitical uncertainty. It will therefore be more important than ever for insurers to innovate to optimise operations and processes, and carefully manage the pricing cycle to maintain profitability levels in 2024.”
|
